Best Factoring Companies
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Immediate cash flow for your business with affordable rates and flexible terms.
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Best Factoring Companies
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Accounts receivable factoring for your business
Avoid the trade credit cash flow problem
Invoice factoring, or accounts receivable factoring, solves the cash flow problem caused by your customers’ trade credit terms. Trade credit is a business-to-business (B2B) agreement in which your customer purchases goods or services on account without paying you up-front.
Credit terms are typically 30 days or more, depending on your industry and customer. Factoring companies advance you cash for your new invoices, so you don’t have to wait for 30, 45 or 60+ days to receive your hard-earned cash.
Factoring rates as low as 1.5%, up to 5%
Factoring companies offer rates as low as 1.5% for businesses that factor millions in invoices each month from top-rated customers. Smaller businesses can generally expect to pay anywhere between 3% to 4% of the invoice amount depending on monthly factoring amount, invoice volume, and days outstanding.
Advance rates from 75% to 90%
Factoring companies don’t advance the full amount of your invoices. They hold a reserve as an allowance for any unexpected bad debts or short-falls. Advance rates are typically 75% to 90%.
Contract terms range anywhere from one month to 2 years, with some factoring companies offering a no-term contract that lets you cancel at any time.
Non-recourse factoring – credit safety
Many factoring companies offer non-recourse factoring which is a credit guarantee that protects you if your customer doesn’t pay. Non-recourse factoring usually costs more than recourse, but it may be worth the insurance. Non-recourse only applies to losses resulting from credit issues such as insolvency or bankruptcy. No matter the recourse option, you’re always liable for disputes, faulty goods or incorrect billing.
How accounts receivable factoring works for you
- After completing your sale or service, you send your invoice to the factoring company.
- The factoring company verifies the invoice is correct.
- The factoring company funds your bank account, often the same day.
- The factoring company collects the accounts receivable from your customer.
- The factoring company sends you the reserve as final payment.